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Cannery Casino loans edge closer to par as Boyd to buy Vegas assets

Loans backing Cannery Casino edged closer to par on news that Boyd Gaming agreed to purchase the company’s Las Vegas assets for $230 million. The sale represents the remainder of the company’s assets—recall late last year Cannery entered into a revised deal to sell The Meadows Racetrack and Casino to Gaming & Leisure Properties—and with both asset sales, the company’s first- and second-lien loans are expected to be fully repaid, according to sources.

In turn, the first-lien term loan due 2018 (L+475, 1.25% LIBOR floor) is marked a half-point higher following the news, at 99.5/100, according to sources. The second-lien term loan due 2019 (L+1,075, 1.25% floor) moved up to a 99.5 bid, from 98.75 yesterday morning, according to sources.

The Las Vegas transaction, which was announced late yesterday, is expected to close in the third quarter. NYSE-listed Boyd said it expects to fund the transaction with cash on hand. Accounting for expected synergies and operating refinements, Boyd said it expects the Cannery assets to generate $32 million in EBITDA during its first year of ownership, which implies a purchase price multiple of about 7.2x.

As reported, privately held Cannery and GLPI in December entered into an amended agreement in which GLPI will acquire the Meadows property for $440 million. At the time, the companies said closing was expected in the second half of 2016, with an outside closing date of November 2016. Cannery Co-CEO William Paulos said all net proceeds would be used to reduce debt. (For additional details, see “Cannery Casino TLs quoted higher on news of amended asset-sale deal,” LCD News, Dec. 16, 2015.)

Cannery Casino is rated B–/Caa1. The issuer’s existing loans, an originally $385 million first-lien term loan and a $165 million second-lien term loan, date back to 2012, proceeds of which were used to refinance debt. Deutsche Bank is administrative agent. — Kerry Kantin

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Third Ave’s liquidating debt fund holds concentrated, inactive paper

The leveraged finance marketplace is abuzz this morning ahead of a conference call to address to a plan of liquidation for the Third Avenue Focused Credit mutual fund following big losses this year, mild losses last year, heavy redemptions, and now a freeze on withdrawals. The news was publicly announced last night by the fund, and there will be a call at 11 a.m. EST for shareholders with lead portfolio manager Thomas Lapointe, according to the company.

Market sources yesterday relayed rumors of a near-$2 billion redemption from the asset class, and as one sources put forth, “the odd thing was it was difficult to trace the money that left, what was sold, and where it went.”

That was followed up by last night’s whopping, $3.5 billion retail cash withdrawal from mutual funds (72%) and ETFs (18%) in the week ended Dec. 9, according to Lipper, although it’s not entirely clear if that figure—the largest one-week redemption in 70 weeks—can be linked to Third Avenue. (LCD subscribes to weekly fund flow data from Lipper, but cannot see inside the aggregate observation.)

Nonetheless, it’s worthy of a dive into the open-ended fund, which trades under the symbol TFVCX. The fund shows a decline of 24.5% this year, versus the index at negative 2.94%, after a 6.3% loss last year, versus the index at positive 2.65%, according to Bloomberg data and the S&P U.S. Issued High Yield Corporate Bond Index.

It’s an alternative fixed-income fund that’s “extremely concentrated,” and “hardly representative of a ‘high yield’ or ‘junk bond’ fund,” outlined Brean Capital’s macro strategist Peter Tchir in a note to clients this morning. He highlighted that Bloomberg analytics show a portfolio that’s almost 50% unrated, nearly 45% tiered at CCC or lower, and just 6% of holdings rated BB or B.

The holdings are all fairly to extremely off-the-run, hence the trouble selling assets to meet redemption, and thus, the liquidation. The remaining assets have been placed into a liquidating trust, and interests in that trust will be distributed to shareholders on or about Dec. 16, 2015, according to the company.

Top holdings follow, and none have traded actively or very much in size of late, trade data show:

  • Energy Future Intermediate Holdings 11.25% senior PIK toggle notes due 2018; recent trades in the Ch. 11 paper were at 107.5.
  • Sun Products 7.75% senior notes due 2021; recent trades were at 87.5, versus 90 a month ago and the low 70s a year ago.
  • iHeartCommunications 14% partial-PIK exchange notes due 2021; block trades today were at 30 and 32, from 27 last month.
  • New Enterprise Stone & Lime 11% senior notes due 2018; odd lots traded recently in the low 80s, versus mid-80s last month.
  • Liberty Tire Recycling 11% second-lien PIK notes due 2021 privately issued in an out-of-court restructuring; trades reported in the mid-60s.

Amid those any many others of a similar ilk, the fund also reports a holding in Vertellus B term debt due 2019 (L+950, 1% LIBOR floor). The chemicals credits put the $455 million facility in place in October 2014 as part of a refinancing effort, pricing was at 96.5, and it’s now at 78/82, sources said.

“Investor requests for redemption … in addition to the general reduction of liquidity in the fixed income markets, have made it impracticable for FCF going forward to create sufficient cash to pay anticipated redemptions without resorting to sales at prices that would unfairly disadvantage the remaining shareholders,” according to the company statement.

“In line with its investment approach, FCF has some investments in companies that have undergone restructurings in the last eighteen months, and while we believe that these investments are likely to generate positive returns for shareholders over time, if FCF were forced to sell those investments immediately, it would only realize a portion of those investments’ fair value given current market conditions,” the statement outlined.

Further details are available online at the Third Avenue Management website. — Matt Fuller

Follow Matthew on Twitter @mfuller2009 for leveraged debt deal-flow, fund-flow, trading news, and more.

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Scientific Games bonds slip further on CFO resignation

Bonds backing Scientific Games slipped further today after the company announced the resignation of its Chief Financial Officer, Scott Schweinfurth, according to a company release. The 10% notes due 2022 shed 2.5 points to 77.625, yielding 15%, according to trade data. Meanwhile, sources quote the 7% notes due 2022 at 96/97, down from trades at 97.50 on Friday. The company’s shares are down nearly 4% at $7.62 today.

As reported last week, Scientific Games debt and equity came under pressure after the gaming technology company released third-quarter results that came in shy of Street expectations. The 10% notes, for instance, had been trading in the high 80s prior to the earnings release, before shedding five points on the results to the mid-80s and ending the week at an 80 context.

Loans backing Scientific Games are little changed today, with the B-2 tranche due 2021 (L+500, 1% LIBOR floor) recently marked at 92.75/93.75, though note the loan is about 5.5 points lower since the earnings release. According to the statement, Schweinfurth will continue in his role through the year-end financial audit and filing of its Form 10-K and the appointment of his successor.

Conditions are soft today in the high-yield market, with the cash market down about a quarter of a point and ETF sellers circulating, sources relay. The HY CDX 25 is quoted at 101.25, unchanged today, but down 1.3% week-over-week.

B+/B2 Scientific Games placed the $950 million issue of 7% secured notes and a $2.2 billion issue of 10% unsecured notes in November 2014 via a J.P. Morgan–steered underwriting team to help fund the Bally acquisition. The company also placed the $2 billion B-2 term loan in September 2014 to support the Bally transaction; the loan was issued at 99. Bank of America Merrill Lynch is administrative agent on the term loan. —Staff reports

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LCD’s High Yield Market Primer/Almanac Updated with 3Q Charts

LCD’s online High Yield Bond Market Primer has been updated to include third-quarter 2015 and historical volume and trend charts.

The Primer can be found at HighYieldBond.com, LCD’s free website promoting the asset class. HighYieldBond.com features select stories from LCD news, weekly trends, stats, and analysis, along with recent job postings.

We’ll update the U.S. Primer charts regularly, and add more as the market dictates (new this time around: an historical look at Fallen Angels, courtesy S&P).

Charts included with this release of the Primer:

  • US High Yield Issuance – Historical
  • 2015 High Yield Issuance, by Purpose
  • High Yield LBO Issuance
  • Fallen Angels – Historical
  • Cash Flows to High Yield Funds, ETFs
  • PIK Toggle Issuance (or lack thereof)
  • Yield to Maturity: Historical, Recent

LCD’s Loan Market Primer and High Yield Bond Market Primer are some of the most popular pieces LCD has published. Updated annually (print) and quarterly (online) to include emerging trends, they are widely used by originating banks, institutional investors, private equity shops, law firms and business schools worldwide.

Check them out, and please share them with anyone wanting an excellent round-up of or introduction to the leveraged finance market.

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Caesars Entertainment restructuring agreement fails to garner needed support

Caesars Entertainment Co. (CEC) said that its restructuring agreement with a group of second-lien lenders of bankrupt unit Caesars Entertainment Operating Corp. (CEOC) has failed to attract sufficient support from second-lien lenders, and therefore has expired and will not become effective.

The company said in a Form 8-K filed Sept. 21 with the Securities and Exchange Commission that it had been in discussions with second-lien lenders to extend the restructuring pact, but was unable to agree upon terms to do so. The company added, however, that notwithstanding the agreement’s expiration, it would “continue to engage in discussions with junior creditors on the terms of a consensual plan of reorganization for CEOC.”

The company also noted that the expiration of the RSA with second-lien lenders would “not affect” the separate restructuring pacts the company has entered into with first-lien noteholders and first-lien bank lenders, respectively.

As reported, the company announced the restructuring agreement with second-lien lenders on July 21, but said that it would not go effective until holders of more than 50% of the second-lien notes signed on.

The company did not disclose the level of support for the pact, but a report from Bloomberg at the time said that the noteholders agreeing to the pact held about 30% of the second-lien notes, and included names like Paulson & Co., Canyon Partners, and Soros Management.

“With the public announcement of the terms of this enhanced restructuring agreement, Caesars Entertainment and CEOC will seek to gain further support,” the company said at the time. Indeed, the pact included numerous provisions designed to induce support for the pact from lenders, including, on the carrot side, payment of potential forbearance fees and distributions of additional equity if second lien lenders sign on to the agreement, and on the stick side, threats of a cram down if they were to oppose the plan.

At the time it disclosed the agreement, the company was engaged in a last-ditch effort to convince a Chicago bankruptcy court judge to stay several lawsuits that had been filed against CEC by second-lien lender groups, even though CEC was not itself in Chapter 11, by arguing, among other things, that a consensual resolution of the issues being raised by second-lien lenders in the case was within reach.

Alternatively, the company warned that CEC could be forced to join its unit CEOC in bankruptcy if the lawsuits were allowed to proceed.

Second-lien holders have been a particular thorn in the company’s side, contending that a series of transactions entered into by the company over the past two years have been aimed at transferring valuable assets away from CEOC to the benefit of CEC’s shareholders, ultimately at the expense of CEOC’s second-lien lenders.

On July 22, however, the bankruptcy court ruled against the company, and allowed the lawsuits, pending in both New York and Delaware, to proceed. – Alan Zimmerman

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Energy sector, Colt Defense focus of LCD’s Restructuring Watchlist

The beleaguered energy sector dominated activity this quarter on LCD’s Restructuring Watchlist, with Sabine Oil & Gas missing an interest payment on a bond and Hercules Offshore striking a deal with bondholders for a prepackaged bankruptcy.

Another high-profile bankruptcy this month was the Chapter 11 filing of gunmaker Colt Defense. Colt’s sponsor, Sciens Capital Management, agreed to act as a stalking-horse bidder in a proposed Section 363 asset sale. The bid comprises Sciens’ assumption of a $72.9 million term loan, a $35 million senior secured loan, and a $20 million DIP, and other liabilities.

The missed bond interest payment for Sabine Oil & Gas was due to holders of $578 million left outstanding of Forest Oil 7.25% notes due 2019, assumed through a merger of the two companies late last year.

The skipped payment comes after a host of other problems. Sabine Oil has already been determined to have committed a “failure to pay” event by the International Swaps and Derivatives Association, and will head to a credit-default-swap auction. The determination by ISDA is related to previously skipped interest on a $700 million second-lien term loan due 2018 (L+750, 1.25% LIBOR floor).

Meantime, Hercules Offshore on June 17 announced it entered a restructuring agreement with a steering group of bondholders over a Chapter 11 reorganization. The agreement was with holders of roughly 67% of its10.25% notes due 2019; the 8.75% notes due 2021; the 7.5% notes due 2021; and the 6.75% notes due 2022, which total $1.2 billion.

Among other developments for energy companies, Saratoga Resources filed for Chapter 11 for a second time, blaming challenges in field operations, the decline in oil and gas prices, and an unexpected arbitration award against the company. Thus, Saratoga Resources has been removed from the list. Another company previously on the Watchlist, American Eagle Energy, has been removed following a Chapter 11 filing in May.

Another energy company, American Energy-Woodford, could work itself off the Watchlist through a refinancing. On June 8, the company said 96% of holders of a $350 million issue of 9% notes due 2022, the company’s sole bond issue, have accepted an offer to swap into new PIK notes.

Also, eyes are on Walter Energy. The company opted to use a 30-day grace period under 9.875% notes due 2020 for an interest payment due on June 15.

Another energy company removed from the Watchlist was Connacher Oil and Gas. The Canadian oil sands company completed a restructuring in May under which bondholders received equity. The restructuring included an exchange of C$1 billion of debt for common shares, including interest. A first-lien term loan agreement from May 2014 was amended to allow for loans of $24.8 million to replace an existing revolver. A first-lien L+600 (1% floor) term loan, dating from May 2014, was left in place. Credit Suisse is administrative agent.

Away from the energy sector, troubles deepened for rare-earths miner Molycorp. The company skipped a $32.5 million interest payment owed to bondholders on a $650 million issue of first-lien notes. Restructuring negotiations are ongoing as the company uses a 30-day grace period to potentially make the payment.

In other news, Standard & Poor’s downgraded the Tunica-Biloxi Gaming Authority to D, from CCC, following a skipped interest payment on $150 million of 9% notes due 2015. Roughly $7 million was due to bondholders on May 15, and the notes were also cut to D, from CCC with a negative outlook. The company operates the Paragon Casino in Louisiana.

Constituents occasionally escape the Watchlist due to improving operational trends. Bonds backing J. C. Penney advanced in May after the retailer reported better-than-expected quarterly earnings and improved sales.

In another positive development, debt backing play and music franchise Gymboree advanced after the retailer reported steady first-quarter sales and earnings that beat forecasts. Similarly, debt backing Rue 21 gained in May after the teen-fashion retailer privately reported financial results, according to sources. – Abby Latour

Follow Abby on Twitter @abbynyhk for middle-market deals, leveraged M&A, distressed debt, private equity, and more

Here is the full Watchlist, which is updated weekly by LCD (Watchlist is compiled by Matthew Fuller):

Watchlist 2Q June 2015

 

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Trump Taj Mahal could file Chapter 11 ‘within days’ – report

trumptajTrump Entertainment Resorts last remaining casino, Trump Taj Mahal, could be headed to Chapter 11, according to a report yesterday afternoon in the New York Post.

According to the report, which cites anonymous sources, the company recently violated some of its loan covenants, and negotiations with lenders have not produced a restructuring solution. The report said that the company had hoped that Carl Icahn, who holds a significant chunk of the debt, would agree to a debt-for-equity exchange, but hopes for that “have faded.”

The Post said the filing could come “within days.”

Meanwhile, online news site Philly.com reported that the Taj Mahal said in a financial filing on Aug. 22 that it could run out of cash needed to pay its bills, and it needed to either find additional borrowings or restructure its existing debt. The report did not specifically identify the filing or provide further details.

As reported, Trump Entertainment Resorts exited Chapter 11 for the third time on July 16, 2010, with Avenue Capital as the company’s largest shareholder (see “Trump Entertainment exits Ch. 11; no A/C in Atlantic City,” LCD, July 16, 2010). The reorganization featured, among other things, a $225 million rights offering backstopped by second-lien lenders, and led by Avenue, to fund distributions under the plan. The company’s first-lien lenders at the time, Beal Bank and Icahn, received a combination of cash proceeds and new secured debt, after the court rejected their rival plan proposal that would have exchanged their first-lien debt for equity.

Several months after its emergence, the company sold its Trump Marina Hotel Casino for $38 million (see “Trump Entertainment in pact to sell Trump Marina for $38M,” LCD, Feb. 15, 2011) leaving it with the Taj and the Trump Plaza.

The Trump Plaza is slated to close down on Sept. 16.

The news, if true, is just the latest blow to Atlantic City, which has seen numerous casinos close down recently. – Alan Zimmerman

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Gaming and Leisure inks $1B pro rata facility to back Penn National spin-off

Gaming and Leisure Properties disclosed today that it has obtained a $1 billion senior unsecured credit facility in connection with its spin-off from Penn National Gaming.

The five-year loan package is split between a $700 million revolver and a $300 million A term loan. Pricing is tied to a ratings-based grid, ranging from L+100-200, with a commitment fee ranging from 15-30 bps. Pricing opens at L+175. Assuming the facility’s BBB-/Ba1 ratings are maintained, pricing is expected to fall to L+150 three months after the closing date.

Earlier this month, Gaming and Leisure Properties completed a $550 million offering of 4.375% senior notes due 2018, a $1 billion offering of 4.875% notes due 2020, and a $500 million offering of 5.375% notes due 2023. Proceeds were used to back the spin-off. Lead bookrunners on the 2018 and 2023 series were Bank of America, J.P. Morgan, and RBS, while lead bookrunners on the 2020 notes were Bank of America, RBS, and Goldman Sachs.

Gaming and Leisure Properties’ spin-off became effective today. The company is now a separate company that owns the real estate associated with 21 casinos, including two facilities that are currently under development in Ohio.

Gaming and Leisure Properties is rated BB+/Ba1. – Richard Kellerhals

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Station Casinos readies $2B leveraged loan deal

Bank of America Merrill Lynch, Deutsche Bank, J.P. Morgan and Credit Suisse have scheduled a bank meeting for 1:30 p.m. EST on Thursday, Feb. 14, to launch a $1.975 billion senior secured financing for Station Casinos, according to sources.

The proposed financing is split between a $1.625 billion B term loan and a $350 million revolving credit facility. Additional details were not available at press time.

The gaming concern was last in market in September with a $775 million loan, for which Station Casinos NP Opco LLC and Station GVR Acquisition were co-borrowers. That transaction included a $200 million, five-year revolver and a $575 million, seven-year B term loan.

The institutional loan cleared the market at L+425, with a 1.25% LIBOR floor and a 99.25 offer price. It includes one year of 101 soft-call protection. Proceeds were used to refinance Station Casinos’ opco debt and loans issued by GVR.

For reference, as of Sept. 30, the company also had in place about $804 million of term debt and $521 million of notes issued at the propco level, SEC filings show.

Station’s properties are located throughout the Las Vegas Valley and include various amenities, including restaurants, entertainment venues, movie theaters, bowling and convention/banquet space, as well as traditional casino-gaming offerings. The company is rated B/B3. – Kerry Kantin

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Foxwoods proposes $520M debt reduction in final restructuring terms

The Mashantucket Pequot Tribal Nation, the Tribal gaming concern that owns Foxwoods Resort Casino, made public the finalized terms for its proposed restructuring, highlighting a $520 million reduction in debt, according to documents released on the municipal market disclosures website.

The consensual restructuring outlined would take outstanding debt to $1.72 billion, from $2.24 billion, while changing rates, terms and maturities. LCD had outlined some of the initial details of the proposal when it was announced in August. The finalized proposal preserves but extends the senior debt and special-revenue obligations, applies discounts to its subordinated special-revenue obligations and 8.5% notes, and adjusts the term and interest rates on the debt instruments and provides further mechanisms for holders of SSROs and 8.5% notes to receive additional recoveries if cash flows are available.

The total leverage will be knocked down to 7.8x, from 10.2x, according to an analysis by GLC Advisors & Co. released alongside the proposal.  GLC is the financial advisor to holders of the existing uninsured SRO, SSRO and notes. MPTN’s financial advisor for the restructuring is Miller Buckfire & Co., and its legal counsel is Weil, Gotshal & Manges.

The trustee and its counsel, Mintz Levin, will host a conference call for SSRO holders and other market participants to discuss the restructuring proposal and how it relates to the SSROs on Wednesday, Oct. 3, at 1:00 p.m. EDT, according to the notification on Friday.

Specifically, from top to bottom of the capital structure, the proposal would give Kien Huat I and II, which consist of $6 million and $15 million respectively, recovery in full from the A term loan. The $549 million bank facility will be replaced by A, B, and C term loans. The new A term loan due 2017 totals $310 million and is priced at L+400. The $260 million B term loan due 2019 is priced at L+687.5. There will also be another $27 million in senior debt, comprised of a $12 million revolver and $15 million C term loan, both due in 30 months.

The SROs, which total $609 million, including accrued and unpaid interest through Sept. 30, will become $619 million in new SROs maturing in 2025 instead of 2021, with a 7.25% rate (6.25% cash, 1% PIK), which toggles to all cash after close with a cash-flow sweep.

The SSROs, which currently total $415 million, including accrued and unpaid interest, will become $293 million in 18-year SSROs at 7.15% for three years and 6.05% thereafter.

To replace the existing 8.5% notes, there will be $208 million of new PIK-toggle notes due 2035, down from $643 million on the principal and unpaid interest portions of 8.5% notes due 2015. The new coupon is 6.5%, with 1% of in cash and the other 5.5% PIK, and it toggles to cash after eight years.

Tribal disbursements will be $42.5 million in the first year, $40 million the following year, and $35 million annually by the third year, with additional payouts dependent upon available excess cash flow. The Tribe’s share of excess cash flow will begin at 8.5% and increase to 66.75% over time as each debt facility is paid off. The Tribe will also sweep 70% of excess cash flows from new business, which will include Internet gaming. – Max Frumes